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OPPOSITION
TO PROPOSED TOBACCO TAX HIKES
ANNOUNCED; ___________________________
AMENDMENT 3 MAY NOT INCREASE MEDICAID COVERAGE FOR POOR; (ST. LOUIS) – Opposition to the proposed 80-cent a pack cigarette tax hike was announced today by a group of tobacco wholesalers and retailers in Missouri, who have organized to fight the proposal. The newly formed group, Missourians Against Unfair Taxes, is made up of both individual retailers and some of the largest tobacco retailers and distributors in the state. Group members say smokers are being unfairly targeted for a huge tax hike that would mainly benefit hospitals and doctors rather than increase health care for the poor. Less than 30 percent of the revenue is for increased health care coverage for the poor and Medicaid recipients and there are questions that even those funds will be spent as claimed. More than 50 percent of the revenue would go to doctors and hospitals to pay "supplemental" amounts for fees and services. They would not have to provide increased health services. "A 470 percent tax increase on cigarettes is unconscionable and would fall hardest on many people who can afford it the least," said Fred Teutenberg, chairman of Missourians Against Unfair Taxes. "Amendment 3 would tremendously benefit the health care industry but would provide little or no increase in Medicaid coverage for poor people." The group announced its opposition at a news conference today in downtown St. Louis. Amendment 3 will be on the statewide ballot on Nov. 7. Teutenberg, the president of Dirt Cheap Cigarettes and Beer in St. Louis, says many customers and their families are already struggling to make ends meet with the high cost of gasoline, utilities, housing and other essentials. The 80-cent additional tax on cigarettes would be a 470 percent increase and raise the tax from 17 cents to 97 cents per pack – $9.70 per carton. The additional 20 percent tax on other tobacco products would increase the total to 30 percent, a 200 percent increase. The taxes would fall entirely on consumers. If Amendment 3 passes, the combined taxes on a carton of cigarettes would be nearly $15. The state taxes would be in addition to the $3.90 per carton federal tax and the cigarette taxes that dozens of cities impose in Missouri. In St. Louis, for example, the cigarette tax is 70 cents a carton. In Springfield, the tax is 50 cents a carton. Local and state sales taxes are also added. Missourians Against Unfair Taxes says that of the approximate $425 million that would be raised by Amendment 3 each year, only about $125 million is planned to go for additional health care funding for low-income Missourians. About $230 million would go to doctors and hospitals for "supplemental" payments for Medicaid beneficiaries and low-income people, and about $75 million is planned for smoking education and cessation programs. The proposed amendment is the result of an initiative petition sponsored and funded mostly by hospital associations, insurance companies and health associations. About $1.5 million was spent to collect the signatures needed to put the proposal on the ballot. The group backing the proposal is expected to spend $5 million to $10 million to get Amendment 3 approved. The public was kept from participating in the drafting of the initiative petition. "The proposal was drafted in secret and the public was shut out," said Jim Boeving, of Missourians Against Unfair Taxes. "The public was kept out because the proposal was designed by hospitals and doctors to benefit themselves." Boeving operates Discount Smokes & Beer in Springfield. Jon Rand, vice-chairman of Missourians Against Unfair Taxes, said Amendment 3 might not increase funding for Medicaid. "We want voters to know that any funds raised for health care may not be spent as planned. The same thing could happen as with the lottery money – the new money comes in and the old money goes out," he said. "There are no guarantees." Rand is president of Discount Smoke Shops, headquartered in St. Louis, which operates a chain of retail tobacco stores in the Midwest. About 40 stores are located in Missouri. The opposition group also claims the $75 million for tobacco cessation and education programs isn't needed as the state has received more than $1 billion from the tobacco settlement fund. It has been diverted for many other purposes. Nearly $250 million of the funds have been spent for Medicaid coverage. Smokers are essentially funding the payments as the tobacco companies raised cigarette prices to finance the settlement. Last year, the state took in $145 million in tobacco settlement money but spent nothing on tobacco cessation efforts. This has caused Attorney General Jay Nixon, who was involved in the tobacco settlement, to become a staunch opponent of Amendment 3. According to a state audit released this year, the state of Missouri will take in an estimated $4.6 billion from the tobacco settlement funds in the first 25 years. Missourians Against Unfair Taxes also released a report that mentions several other issues and questions regarding Amendment 3: Increased doctor's fees could cost $268 million more annually The state auditor's fiscal summary says Amendment 3 would cost $268 million annually if doctor fees for Medicaid are increased to the same level as Medicare fees. The amendment says this should be established "to the extent funds are available." It isn't spelled out in the amendment how this would work. This could lead to considerable litigation. Annual cost could be more than $1.2 billion for healthcare due to eligibility requirement If Amendment 3 is approved there are several possible scenarios of how revenue generated from the taxes would be spent. One is that funding will stay the same and there is no increase in Medicaid coverage, as the funding in place will be diverted when the new revenue comes in. Another possibility is that the expanded eligibility requirements that Amendment 3 would allow – "individuals with incomes up to 200% or less of federal poverty guidelines" – could lead to an annual cost of $1.2 billion, as a lot more people would be eligible. Eligibility for Medicaid and most social services is based on household income rather than individual incomes. The expanded requirements could lead to litigation as those who are eligible, but for whom there is no coverage due a shortage of funding, could claim they also deserve coverage. The state could have a difficult time defending such a lawsuit. The $1.2 billion figure comes from the fiscal note summary prepared for the amendment by the state auditor's office. It states that the Department of Medical Services indicated that "in order to provide healthcare for Missourians with incomes less than two hundred percent of federal level, it is anticipated that the additional costs would exceed $1.2 billion." Fiscal summary: caseloads could grow by 56,392; cost over $10 million According to the state auditor's fiscal note summary, the proposed amendment could cause an additional 56,392 caseloads if the state has to provide health care to those at 200 percent or less of poverty levels. (A caseload can be either an individual or a family.) This would require an additional 231 workers: 180 caseworkers, 18 supervisors and 33 clerical workers. The annual cost would be $10.2 million to $10.4 million annually in the first years. It would not seem the revenue raised from the amendment could be used for these costs. Education Funds Could Be Affected About $100 million is generated each year from the 17 cent tax on a pack of cigarettes. Of that amount, about $75 million is distributed to school districts throughout the state. If cigarette sales decline due to the higher tax on cigarettes, the funds could be affected. A provision of Amendment 3 allows up to a 3 percent shortfall in these funds to be covered by revenue from the increased tobacco tax. If there is a greater loss of revenue, it will not be covered. A shortfall will not necessarily mean fewer people are smoking. The higher cigarette taxes could cause the state to lose cigarette sales to bordering states. "Amendment 3 is a bad proposal for the state of Missouri," said Monroe Mountford, the Chief Operating Officer of A.E. Wease, Inc. of Desoto and a member of Missourians Against Unfair Taxes. "It would hurt a lot of people and a lot of businesses." The Wease company distributes cigarettes and other products to more than 450 convenience stores. Gerard Ezvan, the owner of Jon's Pipe Shop in Clayton, is opposed to Amendment 3 and says a big increase in tobacco taxes will make it even tougher for shops like his to stay in business. "Consumers already have alternatives to retail tobacco stores, so a big tax will be crushing for us and cause a loss of even more sales," he said. Ezvan's store sells cigars, pipes and pipe tobacco. "Amendment 3 discriminates against smokers," said Ron Spidle, vice-president of Bond Wholesale. "If there is a need to raise funds for healthcare, it shouldn't be just smokers." Bond Wholesale operates Smokes for Less stores in the western part of the state. The treasurer of Missourians Against Unfair taxes, Robert Ward, is president of Smoker's Outlet, Inc. of St. Charles. The company operates 15 smoke shops in outstate Missouri. "Amendment 3 is a terribly flawed proposal," said Ward. "Missouri voters would be wise to reject it."
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PAID
FOR BY MISSOURIANS AGAINST UNFAIR TAXES, ROBERT WARD, TREASURER |